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From:  Kim B.
Date:  Wed, 17 May 2000

If your home is placed into a living trust, does it qualify for the $250,000 exemption when sold, as it would if not in the trust.

Answer

Date:  Fri, 9 Jun 2000

Hello Kim,

During the lifetime of the grantors of a typical revocable living trust, they are treated as owning the property of the trust and report transactions relating to those assets on their individual income tax returns. Consequently, if the grantors would qualify for the exclusion for the sale of the residence outside the trust, they would also qualify with the residence held in trust.

Once a grantor dies, at least part of the trust usually becomes irrevocable. Any share of a residence held in the irrevocable trust usually will not qualify for the exclusion for the sale of a residence.

You should consult with a tax advisor familiar with these issues about your individual situation.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

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